Sterlite Technologies Limited · NSE:STLTECH
Sterlite Technologies — Q2 FY22 Earnings Presentation
44 slides from Sterlite Technologies's earnings presentation, Oct 21, 2021
Slide 1: Enabling digital transformation @ the edge
stl.tech Enabling digital transformation @ the edge Earnings Call Q2 FY22 21st Oct. 2021
Slide 2: Safe Harbour
Safe Harbour Certain words and statements in this communication concerning Sterlite Technologies Limited (“the Company”) and its prospects, and other statements relating to the Company’s expected financial position, business strategy, the future development of the Company’s operations and the genera
Slide 3: Anand Agarwal, Group CEO and Whole Time Director
Anand Agarwal Group CEO and Whole Time Director A strong believer in the transformational power of technology, Anand has navigated STL from an optical connectivity company to a global leader in end-to-end network solutions. With his disruptive efforts, Anand has scaled the organisation to over 100 g
Slide 4: Strong industry tailwinds
Strong industry tailwinds Strong industry 2. Well rounded 3. On-point strategy 4. Robust financial 5. Q&A tailwinds Strategy execution performance © 2021-2022 Sterlite Technologies Limited
Slide 5: At a macro level, the industry is well poised for rapid growth
At a macro level, the industry is well poised for rapid growth 01 02 03 04 Strong Tailwinds Tech becoming Optical Demand Telco Capex of Massive Mainstream on growth trajectory Revival in India Investment Cycle Network creators and 5G, FTTx and ORAN Demand for Optical Telecom reforms & Government / F
Slide 6: Network creators & Governments are investing heavily in digital infrastructure
01 Network creators & Governments are investing heavily in digital infrastructure ENHANCED SPENDING BY NETWORK CREATORS Orange increases BT group increases US operators increase Airtel's Nxtra to invest Rs Hyperscale CAPEX in the Spurt in DC growth in India: ST CAPEX by 22% to FTTH Home pass First-H
Slide 7: Large funding stimulus for broadband programs in the US
01 Network creators & Governments are investing heavily in digital infrastructure Large funding stimulus for broadband programs in the US • Large funds committed by US Federal & state subsidies over the coming 5 -6 years • Further 5x-6x increase expected in federal stimulus (over 2020) • Estimates p
Slide 8: The decade long digital network creation cycle is here!
02 Investments are powering growth, leading to large scale 5G, FTTx, ORAN deployments FTTx & Enterprise Networking 5G is the fastest growing ORAN commitments by leading is growing massively in Europe, technology players are rising India, US • 5G is available with over 180+ commercial • In Europe, FT
Slide 9: Sustained demand for optical fibre is back
03 Sustained demand for optical fibre is back Communication service providers This is driving global OFC are aggressively investing in fibre Evidenced by the recent demand revival for their networks updates from the China market AT&T CEO : More fiber is the company’s top priority 1.2X • Highest Tend
Slide 10: Telco Investment revival
04 Policy reforms and 5G are spurring capex spending in Indian telcos AGR related: • Four-year moratorium on payment of statutory dues by telcos • Rationalization of AGR with exclusion of non-telecom revenues Policy Initiatives by 100% FDI via automatic route approved the Indian PLI scheme to boost
Slide 11: 3 investments cycles are coinciding
We are clearly in a multi-year network build cycle across the globe Multi-year digital networks build cycle 1 2 3 Continued investments to Large Investments for 5G Increasing FTTx penetration modernize networks by globally governments globally 3 investments cycles are coinciding ( 7-10 years timefra
Slide 12: Well rounded strategy
Well rounded strategy 1. Strong industry Well rounded 3. On-point strategy 4. Robust financial 5. Q&A tailwinds strategy execution Performance © 2021-2022 Sterlite Technologies Limited
Slide 13: We have an integrated STL Business Model
We have an integrated STL Business Model System integration services Optical Networking Solutions Wireless Solutions Network Software Solutions • Optical and Specialty Cables • Hardware: Radio units • BSS products: Digital and cloud • Optical Fibre • Software: RAN Intelligent platforms • Optical Int
Slide 14: We made a series of strategic investments to strengthen our portfolio
We made a series of strategic investments to strengthen our portfolio Optical System Network Wireless Networking Integration Software Optical Interconnect Data Center Interconnect CU / DU Software (ASOCS Network Software Capability (Optotec) Services (IDS) Investment) (Elitecore) Global foot Europe
Slide 15: These strategic choices have led to a 5x increase in our TAM
These strategic choices have led to a 5x increase in our TAM Total Addressable Market $ BN $40 bn 5 Wireless (Open RAN) 5x 3 Network Software 14 System Integration $ 16 bn 3 $8 bn 5 18 Optical Networking 7.5 7.5 2015 2018 2021 Clear focus to increase market share in this $40 bn. TAM © 2020-2021 Ster
Slide 16: We are now focused on these 3 levers for growth
We are now focused on these 3 levers for growth 2 Globalise SYSTEM INTEGRATION Take System Integration business 10 yrs and global of large scale scale in India ecosystem integration Services 1 Grow 3 Build Software pFTTx Optical ORAN Strong wireless business Solutions business OPTICAL WIRELESS Hardw
Slide 17: On-point strategy execution
On-point strategy execution 1. Strong industry 2. Well rounded On-point strategy 4. Robust financial 5. Q&A tailwinds strategy execution performance © 2021-2022 Sterlite Technologies Limited
Slide 18: Ankit Agarwal, Managing Director
Ankit Agarwal Managing Director A deep believer in innovation and customer-first approach Ankit is focused on developing next-gen solutions to address the evolving network and communication opportunities in the telecommunications landscape. He has played a crucial role in STL's global expansion and
Slide 19: Grow Optical Networking Business - Continued Momentum on Opticonn
1 Grow Optical Networking Business - Continued Momentum on Opticonn A. Fibre Optic Cable Market shift towards high 140 • CRU FOCI* grew from 98 in value integrated (OFC + OI) 133 134 Nov’20 to 128 in Sep’21 solution oriented approach 129 128 127 120 124 119 114 100 106 • STL Capacity utilizations co
Slide 20: Grow Optical Networking Business - Europe market share at 26%
1 Grow Optical Networking Business - Europe market share at 26% STL OFC Market share for STL OFC Market share for Global market ex-China Europe 10.0% 25.7% 4.7% 3.1% FY16 FY17 FY18 FY19 FY20 FY21 H1 FY22 FY16 FY17 FY18 FY19 FY20 FY21 H1 FY22 Strongly positioned to further increase global market shar
Slide 21: Optical Interconnect – Large & growing adjacent market
1 Grow Optical Networking Business - Optical Interconnect (OI) – Large & growing adjacent market to propel further growth Global Optical Interconnect market ($ Bn ) ~$2.3bn 9.8 • OI is a technology oriented business with strong opportunity 7.5 for solution sell • A large, growing segment adjacent to
Slide 22: Optical Interconnect - Customised and Engineered Product for FTTx and Data Centres
1 Grow Optical Networking Business - Optical Interconnect - A Customised and Engineered Product for FTTx and Data Centres A customized and engineered solution for fibre management and termination As fibre networks are becoming denser, the no. of optical interconnects are Opto-Bolt Terminals and Drop
Slide 23: Optical Interconnect - offers multi-fold growth potential
1 Grow Optical Networking Business - Optical Interconnect - offers multi-fold growth potential Optical Industry OI attach rate – STL and Industry view Large runway ahead Strategic investments made 100% by STL to kick-start this growth journey 8% 1% STL Q2 FY21 STL Q2 FY22 Industry STL has a large ru
Slide 24: Opticonn: Enabling market share gain via E2E optical networking solutions
1 Grow Optical Networking Business - Opticonn: Enabling market share gain via E2E optical networking solutions PASSIVE CONNECTIVITY ACTIVE CONNECTIVITY World’s 1st + + + End-to-End Optical Networking Solution PROGRAMMABLE Optical fibre High fibre count cable Optical Interconnect FTTX Key differentia
Slide 25: Globalise System Integration Business: Continued growth in attractive customer segments
2 Globalise System Integration Business Continued growth in attractive customer segments ~6X revenue growth in the last 5 years 2016 2021 Defense & Large High Profile and Critical E2E NW Modernization Enterprises Projects Telecom Deploying ~ 15,000 KM of fiber annually, Companies growing at a CAGR o
Slide 26: Robust execution platform and early wins in the UK
2 Globalise System Integration Business Robust execution platform and early wins in the UK New Orders wins in UK Clearcomm + STL Our second & third win Integration completed • Leading alternate telecom • Completed Integration service providers in UK of Clearcomm & STL • STL to deploy FTTx mantra to
Slide 27: Increased speed of execution
2 Globalise System Integration Business Increased speed of execution India, Public India, Private Global Projects NAVY’S Network Modern Optical Network UK Modernisation Gigabit Network Project Varun 99% FTTH , UK 2% (Indian Navy Project): Completed Fiber roll out 62% (Large Indian telco) Completed P
Slide 28: Build Wireless Solutions
3 Build Wireless Solutions Continued Investments in Technology, Deep Engagements with Customers Deep customer engagements Product Development on track across geographies • 11 early stage engagements across EMEA and India OpenRAN 5G Radio RIC Launched Under Development • 14 participation stage engage
Slide 29: Experienced business leadership in place to keep execution of growth strategy on track
Experienced business leadership in place to keep execution of growth strategy on track Optical Solutions System Integration Wireless Solutions Key Accounts Paul Praveen Chris Sandeep Atkinson Cherian Rice Girotra Chief Executive Officer, Chief Executive Officer, Chief Executive Officer, Global Sales
Slide 30: R&D Spent as % of Revenue
Consistent increase in R&D investments R&D Spent as % of Revenue 3.5% 3.2% 3.0% 2.6% 2.5% 2.3% 2.0% 1.4% 1.5% 1.1% 0.9% 1.0% 0.5% 0.5% 0.0% FY16 FY17 FY18 FY19 FY20 FY21 H1 FY22 Consistent increase in R&D investment Leading to a patent Count of 636 at the end of Q2 FY22 30 © 2021-2022 Sterlite Techn
Slide 31: Robust financial performance
Robust financial performance 1. Strong industry 2. Well rounded 3. On-point strategy Robust Financial 5. Q&A tailwinds strategy execution Performance © 2021-2022 Sterlite Technologies Limited
Slide 32: Mihir Modi, Chief Financial Officer
Mihir Modi Chief Financial Officer A prolific professional, Mihir has more than 20 years of experience in Finance, M&A, Strategy, and General Management. As the Chief Financial Officer of STL, Mihir is actively working towards delivering consistent shareholder value through strong financial performa
Slide 33: Our order book is growing
Our order book is growing Open Order Book (Rs. bn.) Order Book Spread (Rs. bn.) ~ 88 115 107 81 60 ~ 27 Q2 FY19 Q2 FY20 Q2 FY21 Q2 FY22 6M FY22 FY23 & beyond Open Order Book Customer Segment wise Open Order Book Split Enterprises O&M 16% 22% Citizen networks 24% 59% Telcos 1% 78% Cloud Capex © 2021-
Slide 34: Revenue mix is moving to segments and geographies of choice
Revenue mix is moving to segments and geographies of choice Key Order Wins Customer Segments Geographical Distribution Q2 FY22 Revenues (Rs. bn.) Revenues (Rs. bn.) 20 28 20 28 • Multi-million dollar deals with 3% 3% 1% 2% 0% 2% 11% 8% large service providers in UK to connect homes to broadband 15%
Slide 35: As expected, we are back to QoQ & YoY growth trajectory
As expected, we are back to QoQ & YoY growth trajectory +30% +27% 15.08 2.69 13.09 2.38 11.60 2.12 Q2 FY21 Q1 FY22 Q2 FY22 Q2 FY21 Q1 FY22 Q2 FY22 Revenue (Rs. bn.) EBITDA (Rs. bn.) • Our Optical business continues to grow QoQ • Our project execution in India and UK shall further strengthen from Q3
Slide 36: We plan to reach Rs. 100 bn. annualised run rate by Q4 FY23
We plan to reach Rs. 100 bn. annualised run rate by Q4 FY23 Revenue Bridge ( Rs. bn. ) 100 • New portfolio < Radio & RIC > adding to new revenue line in • Services foray in wireless solution 60 Europe with significant addition to OB • Increase in OFC • Significant increase in volume from 28 mn. O&M
Slide 37: The net debt/equity has peaked out & is expected to trend down
The net debt/equity has peaked out & is expected to trend down 28.15 0.79 1.21 Free Cash Flow @ consolidated level – H1 FY22 Rs. bn. 24.10 2.76 0.71 Cash Profit after Tax 3.27 (Increase) / Decrease in working Capital (2.56) Operating Cash Flow 0.71 CAPEX (2.76) Free Cash Flow (2.05) Net Debt Operati
Slide 38: Completion of large capex cycle & future capital allocation will lead to lowering of leverage
Completion of large capex cycle & future capital allocation will lead to lowering of leverage Organic CAPEX Capacity Building Cash flow from operations Total Funds Rs. 17.3 bn. (105% of CFO) FY19 - 21 Rs. 16.4 bn. available Net debt/Equity increased Inorganic Investment from 0.7 to 1.16 Increase in
Slide 39: Financials: Abridged Version
Financials: Abridged Version P&L (Rs. bn.) Q2 FY22 Q2 FY21 H1 FY22 H1 FY21 Balance Sheet (Rs. Bn.) H1 FY22 FY21 Revenue 15.08 11.60 28.17 20.36 Net Worth 21.71 20.85 EBIDTA 2.69 2.12 5.08 3.43 Net Debt 28.15 24.10 EBITDA % 18% 18% 18% 17% Depreciation 0.74 0.82 1.44 1.56 Total 49.86 44.95 EBIT 1.95
Slide 40: We are committed to deliver our financial targets
We are committed to deliver our financial targets Growth Revenue Run rate : Rs. 100 bn. per annum by Q4 FY23 Capital Net debt/equity < 0.5 by Q4 FY23 Structure Returns RoCE >20% © 2021-2022 Sterlite Technologies Limited 40
Slide 41: We are also committed to deliver on our ESG targets
We are also committed to deliver on our ESG targets ENVIRONMENTALLY SUSTAINABLE GOVERNED RESPONSIBLE OPERATIONS WITH CARE World’s 1st ZWL Certified Committed towards UN** Goals Strong internal governance 135,000+ MT 100% Two of the Big Four Waste diverted from landfills and recycled. Zero Waste to L
Slide 42: Summary
Summary Our strategy to increase market share in $40 bn. TAM on the back of three growth levers is showing results In the optical networking business, our global OFC market share and optical interconnect attach rate is increasing In system integration business, we have integrated Clearcomm, secured
Slide 43: Lets answer your questions
Lets answer your questions 1. Strong industry 2. Well rounded 3. On-point strategy 4. Robust financial Q&A tailwinds strategy execution performance © 2021-2022 Sterlite Technologies Limited
Slide 44: beyond tomorrow
beyond tomorrow © 2021-2022 Sterlite Technologies Limited 44
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